Stock Market Today: Stocks Tumble After a Hot Inflation Print

High inflation in the form of Wednesday's Consumer Price Index caused stocks to fall and bond yields to rise once again.

Markets had essentially traded sideways in the early days of April, as market participants recalibrated their bets on when the Federal Reserve will begin to taper. Interest rates. Although the central bank remains committed to three cuts in 2024, persistent inflation, a solid laboratory market and strong economic growth have pushed back expectations for when the Federal Open Market Committee (FOMC), the Federal Reserve's rate-setting group, will begin easing rates.

As a result, Wednesday's release of the Consumer Price Index (CPI) had a huge impact on market thinking. Experts say a data-dependent Federal Reserve will likely delay the timing of its first interest rate cut after the CPI revealed inflation accelerated markedly last month. Some experts maintain that three cuts are ruled out for 2024.

Subscribe to Kiplinger's Personal Finance

Be a smarter, more informed investor.

Save up to 74%

Subscribe to Kiplinger's Free Email Newsletters

Profit and prosper with the best expert advice on investing, taxes, retirement, personal finance and more, delivered right to your email.

Profit and prosper with the best expert advice, delivered right to your inbox.

Headline inflation rose 0.4% in March, the Bureau of Labor Statistics he said Wednesday, beating economists' forecast for a 0.3% increase. In annual terms, general inflation increased by 3.5%. This was up from 3.2% a month ago and beat estimates of 3.1%.

Core CPI, which excludes volatile foods and energy Costs, and considered a better predictor of future prices, reached 0.4% month over month, just as they did the previous two months. Economists expected core prices to rise just 0.3%. On a year-over-year basis, the core CPI rose 3.8%, as it did the previous month, versus expectations for a 3.7% increase.

Federal Reserve Chair Jerome Powell and the Federal Open Market Committee (FOMC) are looking for sustained evidence that inflation has fallen to 2% before taking steps to cut interest rates since a maximum of 23 years. The latest CPI report will likely change your estimate, meaning it could be a while longer before we get monetary easing at the next Federal Reserve meeting. Some expert commentary on the CPI report maintains that three rate cuts in 2024 are no longer on the table.

"Today's inflation numbers likely close the door on a rate cut in June, but the Fed is still very motivated to start the cutting cycle this year," says Lauren Goodwin, economist and chief market strategist at Life investments in New York.